The Global Energy Emergency

The end of cheap oil.

Biofuels take food from the mouths of the poor and hungry to make overpriced fuel for cars and produce greater CO2 emissions in their production.

“There’s a huge social issue over how much food source should be used for fuel,” Shell's CEO John Hofmeister recently said. “… That’s not just a U.S. issue. It’s a global issue, particularly when dealing with issues of poverty in society, and food and famine in society.” But an American lifestyle predicated on mobility and comfort depends on energy. And the world in general needs increasing amounts of energy. “As the world continues to develop economically that economic growth is sustained only with more energy,” Hofmeister said. “At the current knowledge of man, much of that energy is hydrocarbon-based.


Global geological supply limitations are beginning to control price for oil as demand continues to increase.

The world’s energy system appears more and more to have come unhinged. Oil is trading at record high prices because demand keeps rising even as supplies become more and more unreliable.  Major oil exporters from Iran to Russia and Venezuela are using their petro-cash to pursue agendas that undercut western society's security and interests. Supplies of natural gas also seem less secure than ever. Critically needed oil to fuel the global economy is in increasingly in jeopardy as Islamic extremism intensifies throughout the middle East and elsewhere, fomenting global instability.

Efforts to boost energy supplies have met with little success because the most attractive geologically rich oil and gas areas are found more and more in countries where state-owned, often inefficient companies control the resources and major more capable international oil companies have less and less access.

Industrialization is spreading to most nations of the world during the first half of the twenty-first century bringing demands for more energy supplies.  Globally it is clear that the developing areas are still far behind the developed countries in terms of energy usage.  Bringing the rest of the world up to the same level as that of the moderate European consumer would more than double the required amount of energy, while taking it to the level of the US consumer, with its greater use of cars and air conditioning,  would necessitate almost five times as much energy as today.

It is worth noting that China and India, together encompassing more than one-third of the world’s population, consume only 17% of the global energy.  For these countries, leveling up their per-capita energy use to the world average would require the equivalent of 40 million barrels of oil per day or half of the world’s current oil production.  The number of vehicles in China is expected to explode from 25 million today to 175 million by 2020. They now have one car per 280 people, but they are industrializing rapidly and they want to live like the West—with one car for every two people.

From an energy standpoint, as the U.S. industrialized it went from oil consumption of about one barrel per person per year in 1900 to 27 barrels in 1970.  China now consumes about 1.3 barrels per person per year. To put all of that in perspective,  China has five times the U.S. population at about 1.5 billion.

Energy consumption in mainland Asia will rise faster than in any other part of the world through 2030, estimates Stephen Terni, president of Exxon's unit in the Russian Far East. Oil and gas use in the Asia region will more than double to 113 million barrels a day, almost equal to the combined consumption of Europe and North America, Terni said Oct. 5

By 2025, the world's demand for oil is going to be 60% greater than it is today, while production capacity is thrown back to 1985 levels. This is due to the world's rapidly growing population and increasing industrialization. China's annual oil consumption growth rate of 7.5% and India's of 5.5% are both expected to take a quantum leap over the next decade.

In the past two years alone the world has consumed over 60 billion barrels of oil-and that rate's going to go much higher.

On May 8th 2006, Viktor Khristenko. Russia's industry and energy minister said; ..."At a time when energy increasingly affects the wellbeing of billions of people around the world, it is imperative that the world's leaders establish a serious plan for achieving energy security..... Almost two billion people worldwide lack modern-day energy services and many do not have electricity. This blocks their access to the many benefits and advances of civilization...."

U.S. consumers alone buy 385 million gallons of gasoline every day.  Suddenly oil has become the most valuable 'currency' there is.  Nothing is as energy dense, safe and portable as petrol, LPG and diesel.  The industrialized Eurasian and Western world is today largely dependant on the oil belonging to the Middle East, not the world's most politically stable region.  Globally easily available cheap oil will be depleted within approximately 40 years if it continues to be consumed at the current rate.

Wars, cartels, political coercion, and political events like the current Iran nuclear problem are now causing 'fear based' price spikes only partially related to any physical drawdown of reserves. National fears and strategic considerations is now forcing massive capital re-allocation to other national and international energy sources.

Energy is everywhere in modern society. Today, societies succeed or fail based upon their access to cheap energy and oil and gas are the cheapest mobile energy forms available today. It is oil and gas that allow machines to complete tasks formerly performed by human or animal power. Without gasoline, food cannot be grown and harvested by only 2% of the population, goods cannot be transported quickly by truck to central processing or distribution points.

Europe and Japan are totally dependant on other countries oil right now. The USA is effectively totally dependant on other peoples oil; most of Asia and the UK will be substantially dependant within 10 years; and without access to the Arctic Resources, the entire world could be almost totally dependant on the Middle East, Russia, Mexico and Venezuela within 20 years.

Only four years ago, the US used 18 million barrels of oil a day; four years later it is using an additional 3.5 million barrels a day. this means just 4.4 per cent of the world's population needs to find a new Kuwait every four years.

Oil is getting scarce

….”The point at which oil production will peak globally is a matter of some contention, but it appears most likely that it will occur in about 4 years time, following which there will be an inexorable decline in its supply of perhaps 3 - 6% per year, meaning that within about a decade, that underpinning commodity of the global village will not be in evidence, since just half the presently estimated one trillion barrels remaining will be left, and it is debatable how much of that will in fact prove recoverable.

There is evidence that some of the Saudi oil-fields have been damaged by the use of enhanced extraction methods, and will not yield as much as has been bargained for. So really, we don't know how much oil will be finally available to us and now is probably a pretty good time to began planning for a future that depends far less on oil, particularly in terms of greatly reduced levels of transportation by relocalising society into a sustainable network of small communities that are provided for by local farms and businesses….”


Saudi Arabia's oil fields are close to their peak of production, and because the fields are so highly pressurized, they will only last until about 2026 before being exhausted if oil continues to be pumped out at the current rate.  Russia, currently (Q4 2005) almost matching Saudi Arabia's current production of 10 million barrels per day, probably passed its peak of production in the 80's. Russia's estimated reserves, if produced at the current high rate, will last only to about 2012.  Norway, the worlds third largest oil volume exporter has also peaked, and at current rates will exhaust reserves by about 2014.

Governments of consuming countries worldwide are quite well aware that the era of cheap petroleum is now disappearing fast.  The world has reached the peak of oil production and future declines are now in order.  Fortunately the turning point for conventional natural gas will probably be somewhat later than for oil.  Some analysts predict a peak for conventional gas production between 2010 and 2020.

It is widely considered that natural gas, which is a much cleaner fuel, will help the world through the crisis due to an existing supply of large stranded global gas reserves, as well as significant improvements in the economics of LNG extraction, compression and shipment technologies.  Nevertheless stranded LNG requires much more capital than oil, which even governments find hard to supply.   Historically, on the electricity generations side, Electric utility  companies in competitive power markets have invested heavily in gas because gas plants are smaller, simpler and require less capital than coal or nuclear plants.
The obvious fact is that the world is in dire need of additional secure oil and gas supplies. While at the same time strident resource nationalism is restricting technically and financially capable oil companies access to much needed reserves.

The US in particular is short of oil and gas now while at the same time China and India are aggressively seeking more oil and gas reserves.  

The US gas fields are essentially drilled out.  80% of all wells ever drilled worldwide are in the US. No matter how many rigs are running, the lack of good available prospects to oil companies in countries who won't steal them the moment they begin producing, on terms that are commercially viable means an energy shortfall is inevitable.    It is here and now. 

Too much global exploration and production has been stymied by corrupt or incompetent state-run oil companies.

There are growing needs for energy transportation capacity – for pipelines and ocean-going tankers and electric transmission wires – and those needs are evident all over the globe. By 2030, the International Energy Agency projects that some $17 trillion in new energy investment will be needed to meet demand. For comparison, America’s gross domestic product in 2005 was $12.4 trillion.

New much needed oil and gas infrastructure builds in Europe and the U.S. are being stymied by environmental and vocal local-interest groups. It appears that affluent Western consumers want all of the goodies and benefits of high levels of energy consumption without paying the price of permitting the infrastructure needed to deliver it. No-one wants to go back to the horse and buggy age but consumers don't want to see offshore drilling rigs or regasification plants anywhere near their neighborhood.

New pipelines from the US Alaskan Arctic Frontier can't be built fast enough to supply the US appetite, and even if they were, the 5 billion- 6 billion cubic feet per day of additional gas supply still wouldn't be enough to satisfy the growing US demand.   In addition, if retail LNG distribution infrastructure for vehicles, (as is common in Australia and elsewhere) was built, a new huge gasoline-replacement market would emerge increasing the demands for gas.

The energy shortfall solution is obviously favoring LNG. Cambridge Energy Research Associates predicts that LNG could comprise as much as 11% of the total US gas supply by 2010.  In 2002, LNG accounted for less than 1% of US consumption.

For example by 2020, the non-contracted demand of China and South Korea for gas will be 200 billion cubic meters.

United has a viable solution for easing the global energy emergency by careful shared cooperative development of the Arctic oil and Gas resources contained in the common Arctic Ocean area. It should be noted that the Arctic Ocean region has high potential for environmentally cleaner natural gas.



The organization ASPO predicts that conventional oil production will peak in 2007.


Projected World Energy Scenarios.


Historical and projected world energy production by energy source, 1970-2025,

Source: International Energy Outlook 2004, EIA. IEA makes a similar projection.

The U.S. needs more foreign natural gas. Canada, America's biggest gas supplier, has passed its peak gas production. Over the past two decades, as American gas fields have declined, U.S. imports of Canadian gas quadrupled. But Canada's gas production peaked in about 2002, and the country's gas output could fall by half over the next two decades. The decline in Canadian gas, coupled with America's ongoing hunger for natural gas means that by 2010, the U.S. will be importing about 10 percent of its daily gas needs in the form of LNG. Much of that gas will come from OPEC countries like Qatar and Nigeria. By 2025, the Federal Energy Regulatory Commission expects LNG to account for 20 percent of America's daily gas consumption.

“Resource nationalism” is currently back in vogue.  But for gas suppliers in particular, it usually ends badly as burnt big end users  switch to other more reliable suppliers.

Russia cannot be relied upon to provide stable energy supplies to the West.  After decades of development, there are about 800 installations in the North Sea and about 4,000 in the Gulf of Mexico.   By contrast, the Russian Federation, with the largest oil and gas shelf in the world, has got two installations in operation, with another three under development. The scope for further development is clear but Russia is busy destroying its credibility on energy.

Russia's reputation as a reliable source of supply has been demolished in part by its crude attack on Shell's $22 billion Sakhalin project, which is more about OAO Gazprom's attempt to get a piece of the project than protecting wildlife, analysts say. The move to take over Sakhalin has also angered Asian nations banking on Sakhalin to help meet their growing energy needs.

Sakhalin, just 25 miles north of Japan, contains the equivalent of 45 billion barrels of oil, equal to the North Sea's reserves, Shell estimates.

High Government fuel taxes are also contributing to the energy price problem for consumers. Among the 30 members of the Organisation for Economic Co-operation the average gasoline tax is $0.88 cents a litre or $4 per gallon. This makes governments quiet willing partners with oil companies as gasoline price increases result in vastly increased tax revenues. Governments could easily alleviate some of the crushing gasoline price burden on their citizens by fixing the fuel tax at a certain lower dollar rate not a percentage of retail prices prices.

The US practices a perverse form of resource nationalism of an entirely different sort.  85 percent of the U.S. offshore continental shelf is currently off-limits to oil and gas production due to local groups opposition to drilling.  Current estimates indicate these areas contain 86 billion barrels of oil and 419 trillion cubic feet of natural gas that are technically recoverable.   Allowing immediate access would significantly reduce U.S. reliance on imports.  In addition, when these leases do come up for sale they are sold to the highest bidder, not the company that promises to drill the most wells and exploit finds. The high up front sale prices soaks up companies vital exploration capital, leaving less and less for drilling and production equipment.  Essentially it is a burdensome "tax in advance". This pushes up the eventual cost of gasoline to consumers.    

Politicians of both US parties, Republican and Democrat, have been restricting the expansion of oil exploration in America's coastal waters. The eastern Gulf of Mexico alone holds an estimated 20 trillion cubic feet of gas and 3.6 billion barrels of oil.    But politicians from coastal states like Florida and Alabama don't want tourists to see drilling rigs when they go to the beach. So those resources are kept off-limits, even though they would help reduce America's need for imported energy.

The US could solve its energy shortfall within five years by opening up the Federal Continental shelf areas on a "promise of work" basis not "who pays the most" basis.   Allowing an initial 3-5 year production tax holiday would create a veritable stampede of drilling rigs to discover fresh fields.

On a global scale, since future extraction technologies incorporate advanced methods of environmental protection and since world oil demand continues to increase, while stability in oil-exporting areas like the Middle East remains tenuous at best, a secured Arctic Commons oil and gas supply becomes ever more attractive.

The UN Iraq Oil-for-Food program was found to be rife with corruption. This suggests that a private consortium with more transparent finances will better serve the interests of the global community in developing the Arctic Commons oil and gas resources.

The USA Council on Foreign Relations recently organized an energy task force, which was chaired by two former CIA directors, James Schlesinger and John Deutch their report is entitled “National Security Consequences of Oil Dependency

Here are some excerpts from the report:

-   The U.S. government has failed to pay sufficient attention to energy in its conduct of foreign policy or to adopt a consistent approach to energy issues.

-   The issues at stake intimately affect U.S. foreign policy, as well as the strength of the American economy and the state of the global environment. But most of the leverage potentially available to the United States is through domestic policy. Thus, the Independent Task Force devotes considerable attention to how oil consumption (or at least the growth in consumption) can be reduced and why and how energy issues must become better integrated with other aspects of U.S. foreign policy.

-   The challenge over the next several decades is . . . to begin the transition to an economy that relies less on petroleum. The longer the delay, the greater will be the subsequent trauma. For the United States, with 4.6 percent of the world’s population using 25 percent of the world’s oil, the transition could be especially disruptive.

-   The voices that espouse ‘‘energy independence’’ are doing the nation a disservice by focusing on a goal that is unachievable.

-   The central task for the next two decades must be to manage the consequences of dependence on oil, not to pretend the United States can eliminate it.

-   While reducing U.S. oil imports is desirable, the underlying problem is the high and growing demand for oil worldwide.


Ethanol has been touted as an alternative energy source but it has many undesirable side effects. In Brazil, where sugar-based ethanol comprises at least 20% of gasoline mixtures and hydrous ethanol is sometimes used by itself, deforestation caused by over-cultivation has made ethanol as much of an enemy as a friend to thinking environmentalists. Though conservationists would like to see the lower emissions that biofuels bring, they are hesitant to see any more of Brazil's biodiversity threatened by turning natural rainforests into sprawling fuel farms. An ill-considered rush into ethanol could mean that much needed food crops are pushed aside and the natural environment damaged.

Ethanol a Fuel only a daft politician could love: A focus on ethanol does little to reduce carbon emissions while creating other environmental problems, the International Energy Agency, the consuming countries' watchdog, said in its most recent report.  It calculates that the primary energy needed to generate a unit of ethanol is equal to 80 per cent of the energy that unit of ethanol will produce. "The production of such crops for biofuels would increase global competition for arable land, increase the pressure to turn more land over to crops, including rain forests, and drive up food and fodder prices." Thus the poor will get less food so that gas-guzzling SUVs can prosper.

Taxes and Imposts Drives Up Consumer Costs: In the US, politics distorts the energy picture.  The Clean Energy Act of 2007 probably will slow down the pace of Gulf of Mexico production somewhat. With higher US up-front lease auction fees for small 5 mile blocks and onerous oil production royalties off the top, international oil companies will prefer to lift oil from somewhere else in the world, for now. And that will, in turn, increase imports to make up for decreased domestic US production. Which will lead to higher crude prices, and more money in the pockets of foreign producers. OPEC and other oil producers win more; US consumers pay more at the pump and America becomes more “dependent.” US Democrats are thus going to war with Big Oil, the winners will be OPEC and oil-producing countries funding terrorists and the loser will be US consumers.

The Hidden Cost. Blood-and-Oil ; How many trillions of dollars have governments spent to have their military protect oil supplies in foreign lands? How many people have died for it? Nobody counts it. But we spent it, and they certainly died.

US Terror-Free Oil Initiative. In response to the increasing problem of oil revenues being used to fund terrorism, "The terror-free oil initiative is dedicated to encouraging Americans to buy gasoline that originated from countries that do not export or finance terrorism," according to the group's Web site.   A representative said that Omaha's will be the first of several terror-free oil gas stations to open across the country.

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